Announcing the MPS, central bank Governor Fazle Kabir termed it “cautiously accommodative” like the previously ones.
“We’ve kept most of the policies unchanged for accommodating adequate credits to achieve the 8.2 percent GDP growth keeping the inflation rate within 5.50 percent,” he said in his initial statement.
The BB governor also informed that the MPS will now be announced once a year instead of twice. “We find no justification of the half-year basis MPS as the situation doesn’t support any major change in the policy,” he said.
As per the MPS, the overall domestic credit growth was projected at 15.9 percent while the public sector credit from the banking system was set at 24.3 percent and the private sector credit growth at 14.80 percent.
“These were set in line with the government’s GDP growth target and inflation projection,” Fazle Kabir said.
He said although the private sector credit growth looks to be lower, its actual size is 7.3 percent bigger than the public sector credit.
The central bank governor said the banking sector has excess liquidity of Tk 85,616 crore despite some banks are experiencing liquidity crisis.
He said the MPS focuses on reducing the non-performing loans (NPLs).
Replying to a query about depreciation of local currency Taka, Fazle Kabir said there is no need for any depreciation as the government has been promoting export and remittance inflow with cash incentives. “Already there’s an automatic depreciation of local currency as Taka is being traded against US dollar at Tk 84.5 in open market. So, we don’t need to intervene in the market,” he said.
He also claimed that due to measures taken by Bangladesh Bank to lower the advance deposit ratio (ADR) to 5.5 percent from 6.5 percent, increased deposit of public fund to private banks, increased remittance, rise in foreign direct investment and growth in export have led to stability in the inter-bank currency market.
Fazle Kabir said the central bank is contemplating devising a plan to bring the informal sector of business within the formal one by integrating them through internet-based online payment system.
He said there are some risks and uncertainties over the implementation of the new MPS due to some local and international factors, including the introduction of new VAT law, loss of crops for floods, trade war between the US and China and the Brexit issue. “There might be some opportunities to get benefits out of the international trade conflicts as well.”
About the possible misuse of cash incentives for remittance senders, he said Bangladesh Bank has prepared guidelines fixing a ceiling for such incentives to prevent the misuse. “Now, the guidelines are pending with the Finance Ministry for its approval,” he said.